By Scott Swank

The Indy ran an opinion piece last week arguing against the perils of raising the minimum wage. Specifically, it pointed to research out of the University of Washington (UW) showing that after Seattle's wage increase, enough jobs were lost that workers were actually worse off.

It's a fairly compelling result. It's also far from widely accepted, e.g. a study from Berkeley found that workers in Seattle came out ahead overall. Additionally, the Economic Policy Institute (EPI) highlighted problems with the research itself, including the fact that it excluded chain stores, restaurants and big-box retailers, the employers that are best-positioned to absorb wage increases.

---

It's worth stepping back and asking just what a minimum wage "does." At its most basic level, it requires low wage employers to pay more and provides higher wages to their employees. But where does that leave the rest of us?

We know that lower income people spend more of their money on basic consumption, while higher income people spend comparatively more income on investment. So, in short, when lower income people have more money, more money gets spent and, online shopping aside, more of that income is spent locally.

That's broadly a net positive, but at best a very modest one across Nevada's economy. Some back-of-the-envelope calculations in a Forbes article say net effect comes to less than 1/4 of a percent of GDP, though the author only includes people at or below minimum wage, thereby excluding the half (or so) of all hourly workers who earn between minimum wage and his hypothetical $15/hour. Even optimists can likely assume at best a 1 percent boost to GDP. That's not peanuts, but neither will its effect be widely felt.

At the same time, we have to consider the impact of the increased expense to employers. Their first, easiest choice is to increase prices, meaning simply that their customers (us) will ultimately bear the cost of paying their lowest wage employees better. In Seattle, for example, we saw 1-2 percent increases in customer prices.

Their second choice is to decrease paid hours or decrease the number of employees. This is the result the UW paper found in Seattle, but EPI's chief concern with UW's research lay in the fact that the Seattle result runs counter to existing research in Seattle as well as other markets. In other words, Seattle is at best an uncommon scenario, at least to the degree that it resulted in a net negative for workers.

A third choice is to earn lower profits for the owners and shareholders. And the (literally) final choice is to go out of business.

---

How would a minimum wage increase likely shake out in Nevada? For us, higher prices are born by tourists to a greater degree than elsewhere. Decreased hours clearly affect us locally, though. Overall, decreased profits are disproportionately an out-of-state factor in that, other than Port of Subs, no big-box retailers or chain stores or restaurants are based in Nevada.

There are a significant number of locally-based minimum wage employers, particularly across our service sector. And unarguably, business failure is a local phenomenon. The one mitigating factor in business failure is worked out in a recent Harvard study. They found that increased minimum wages had almost no impact on 5-star restaurants (as rated on Yelp), but that it increased the likelihood of closure by 14 percent in restaurants rated 3.5 stars or lower. So we'd be losing our worst dining options, and increasing the prices a bit at the rest.

The final actor is the public sector. Increased minimum wages mean lower outlays for food stamps (SNAP), welfare and even the EITC. Decreased poverty also results in lowered crime, increased health, better educational outcomes, decreased homelessness, and host of other societal gains that in aggregate decrease local, state and federal expenditures.

In short, then, there are net positives and net negatives. On the plus side for Nevada, more of the costs would be out of state than is true in general. On the minus side, we still have quite a bit of slack in our labor market, with a solid "headline" or U-3 jobless rate of 5 percent, but a more worrisome U-6 rate of 11.5 percent (the U-6 rate includes the underemployed, those who are working part-time for economic reasons, and people who are so discouraged that they've quit looking for work).

---

Stepping back, the issue becomes a broad social judgment call. The nation went through the same thing when we eliminated child labor, when we legislated the 40-hour work week, when we instituted any number of other labor provisions. Employers will certainly always wish to pay less and employees want to earn more. Is there enough value in having the government interfere in the market to justify the costs?

Based on what we've seen so far in cities that have increased their minimum wage, it seems that there are no significant downsides to increases that keep minimum wage below $11-12/hour. Most economists agree on this point (if not my particular numbers).

But reasonable people will disagree.

Are we then left with a he-said/she-said scenario, where the reader inevitably drifts toward whichever viewpoint aligns best with their politics and worldview?

I'm sure that's part of the story, but I'd like to focus in on a specific detail of the recent opinion piece that motivated my reply: that it was manifestly without balance or nuance. It focused on a single piece of research that analyzed the results seen in a single city, and that specific research tells the single worst-case story about the impact of raising the minimum wage. This sort of opinion piece cherry picks facts in a way that tells a grossly incomplete story.

Again, the great majority of economists are in agreement that modest increases in the minimum wage do not have a negative impact on employment. The agreement is not as broad on the question of just what counts as a "modest" increase. But even that makes sense, really, as we are just in the last few years starting to see cities increase their minimum wages to a level that matches where The Economist projected an economy like ours ought to be: $12/hour or so.

So what's the value of such an opinion piece? Some opinion pieces aim to inform or persuade the reader. But corporate opinion like the one I am pushing back on is another story. At least in this case, it tells a wildly incomplete version of the facts, all but lying to the reader.

I understand that no editor, nor publisher, wants to winnow balanced from unbalanced opinion pieces, modern-day Solomons with red pens. There is no such absolute measuring stick.

But I know BS when I see it.

Scott Swank writes software and is the chief instructor at the Las Vegas Aikikai.